Correlation Between Empire State and BNTY

Can any of the company-specific risk be diversified away by investing in both Empire State and BNTY at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Empire State and BNTY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire State Realty and BNTY, you can compare the effects of market volatilities on Empire State and BNTY and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Empire State with a short position of BNTY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and BNTY.

Diversification Opportunities for Empire State and BNTY

0.21

Correlation Coefficient

Empire State  BNTY

Modest diversification

The 3 months correlation between Empire and BNTY is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and BNTY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNTY and Empire State is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Empire State Realty are associated (or correlated) with BNTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNTY has no effect on the direction of Empire State i.e., Empire State and BNTY go up and down completely randomly.

Pair Corralation between Empire State and BNTY

Given the investment horizon of 90 days Empire State is expected to generate 23.66 times less return on investment than BNTY. But when comparing it to its historical volatility, Empire State Realty is 8.34 times less risky than BNTY. It trades about 0.04 of its potential returns per unit of risk. BNTY is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in BNTY on September 1, 2024 and sell it today you would earn a total of  0.01  from holding BNTY or generate 52.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Empire State Realty  vs.  BNTY

Empire State Realty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

BNTY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BNTY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, BNTY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and BNTY

The main advantage of trading using opposite Empire State and BNTY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, BNTY can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BNTY will offset losses from the drop in BNTY's long position.

The idea behind Empire State Realty and BNTY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.